In light of concerns about money laundering, the Reserve Bank introduced the Aadhaar-based digital payment system (AEPS). However, this new system has resulted in a decline in transactions worth crores over the past two and a half years. The "AEPS" service is delivered to customers through bank business correspondents (BCs), who are agents of the banks. These BC agents provide services like balance inquiry, cash deposit, and cash withdrawal. The government also uses AEPS to implement subsidy schemes. However, mandating Aadhaar-based digital payments has created obstacles in the timely disbursement of funds under government subsidy schemes. In April 2022, AEPS transactions amounted to ₹27,900 crore, which dropped to ₹23,600 crore in September this year. Two years ago, concerns were raised that AEPS was being used for money laundering. Since then, the Reserve Bank has made fingerprint-based authentication mandatory for every transaction.
After the verification became compulsory, many banks started refusing to process interbank transactions. This arbitrary behavior by banks has undermined the original purpose of the scheme, resulting in delays in receiving subsidy payments for many beneficiaries.
